I’ve been running my eye over ace investor Neil Woodford’s portfolios, looking for potential bargains. Here are three stocks you can buy today at up to 70% less than he paid.
Hedge fund attack
FTSE 250 firm Allied Minds (LSE: ALM) commercialises intellectual property coming out of US universities and government research labs, supporting its portfolio of businesses with capital, central management and shared services.
Woodford has bought a number of tranches of shares in Allied over the years, including in May 2015 when they were trading at around 600p (giving the company a market capitlisation of £1.3bn). The Woodford website published a bullish blog post on the company just prior to this purchase.
In September 2015, when the shares were 499p (market cap £1.1bn), Allied was attacked in a scathing report by New York hedge fund Kerrisdale Capital as “a dressed-up collection of high-risk, low-reward gambles that we believe has at least 70% downside.”
Woodford was unconcerned by the report and has continued to support Allied with further investment. The shares are currently 367p (market cap £794m). The Kerrisdale analysis has its flaws, but some of the issues it raised have left me uneasy. I’d suggest investors need to satisfy themselves that there’s no merit in Kerrisdale’s arguments before considering an investment in Allied.
Woodford more than doubled his stake in Circassia Pharmaceuticals (LSE: CIR) by participating in a fundraising at 288p (market cap £820m) in June 2015.
A year later, Circassia’s shares crashed on the failure of a phase III study of its flagship cat allergy vaccine. This led the company to put the development of its allergy portfolio on hold while awaiting results of a phase III study of its other advanced allergy vaccine — for house dust mites — in spring 2017.
Woodford posted his response to the disappointment, highlighting that Circassia has other “very attractive respiratory products both in the market and under development”, that it “remains very well-financed” and saying “we remain supportive shareholders and from here, we continue to see long-term value in the shares”.
Circassia was demoted from the FTSE 250 to the SmallCap index in September and its shares are currently trading at 84p (market cap £239m), which is 6.6 times forecast revenue for 2017. I’m inclined to think it wise to wait for the upcoming results of the house dust mites vaccine study before considering an investment here.
Regenerative medical devices company Tissue Regenix (LSE: TRX) has neither come under attack by a hedge fund nor suffered a major pipeline setback. Woodford bought a big slug of shares in this AIM-listed company two years ago when they were trading at around 23p (market cap £150m). You can pick them up today at 17p (market cap £129m), so a 26% discount on share price and a 14% discount on market cap.
The company is valued at 7.7 times forecast revenue for 2017 and with another encouraging product update this morning, including prospects for rapid commercialisation, there is plenty of scope for upward revisions of analyst revenue forecasts in the coming year and beyond. Based on the quality of its products and the size of its potential markets, I rate Tissue Regenix as one of the more promising higher risk, speculative buys around today.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.